Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the related notes thereto included
elsewhere in this Quarterly Report on Form 10-Q and the audited condensed
consolidated financial statements and notes thereto and management's discussion
and analysis of financial condition and results of operations for the year ended
December 31, 2013 included in our Annual Report on Form 10-K , filed with the
Securities and Exchange Commission, or SEC, on March 10, 2014. This Quarterly
Report on Form 10-Q contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act. These statements are often identified by the use of words such as "may,"
"will," "expect," "believe," "anticipate," "intend," "could," "estimate," or
"continue," and similar expressions or variations. Such forward-looking
statements are subject to risks, uncertainties and other factors that could
cause actual results and the timing of certain events to differ materially from
future results expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in the section titled "Risk Factors," set forth in Part II,
Item 1A of this Quarterly Report on Form 10-Q and elsewhere in this Report. The
forward-looking statements in this Quarterly Report on Form 10-Q represent our
views as of the date of this Quarterly Report on Form 10-Q. We anticipate that
subsequent events and developments will cause our views to change. However,
while we may elect to update these forward-looking statements at some point in
the future, we have no current intention of doing so except to the extent
required by applicable law. You should, therefore, not rely on these
forward-looking statements as representing our views as of any date subsequent
to the date of this Quarterly Report on Form 10-Q.

Overview

LogMeIn provides a portfolio of secure, easy-to-use cloud-based offerings aimed
at transforming the way people work and live through secure connections to the
computers, devices, data and people that make up their digital world. We believe
our cloud-based services, which are deployed and accessed from anywhere with an
Internet connection, are used to connect more Internet-enabled devices worldwide
than any other connectivity platform on the market. Our solutions are used by
tens of millions of professionals to work from virtually anywhere on virtually
any Internet-enabled device. Hundreds of thousands of small and medium
businesses, or SMBs, use our solutions to manage distributed work environments,
embrace employee-owned technology in the workplace and facilitate collaboration
across distributed teams. Thousands of service providers, including many of the
world's largest hardware and software companies, web hosting providers,
retailers and telecommunications providers, use our solutions to service and
support their customers across mobile, social and online channels.

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We offer both free and fee based, or premium, services. Sales of our premium
services are generated through word-of-mouth referrals, web-based advertising,
online search, the conversion of free users and expiring free trials to paid
subscriptions and direct marketing to new and existing customers.

We derive our revenue principally from subscription fees from SMBs, IT service
providers, mobile carriers, customer service centers, original equipment
manufacturers, or OEMs, and consumers and to a lesser extent, from the delivery
of professional services primarily related to our Xively business. The majority
of our customers subscribe to our services on an annual basis. Our revenue is
driven primarily by the number and type of our premium services for which our
paying customers subscribe. For the six months ended June 30, 2013, we generated
revenues of $78.1 million, compared to $104.0 million for the six months ended
June 30, 2014, an increase of approximately 33%. In the fiscal year 2013, we
generated revenues of $166.3 million.

Certain Trends and Uncertainties

The following represents a summary of certain trends and uncertainties, which
could have a significant impact on our financial condition and results of
operations. This summary is not intended to be a complete list of potential
trends and uncertainties that could impact our business in the long or short
term. The summary, however, should be considered along with the factors
identified in the section titled "Risk Factors" of this Quarterly Report on Form
10-Q and elsewhere in this report.

• There is frequent litigation in the software and technology industries
based on allegations of infringement or other violations of
intellectual property rights. We have been, and may in the future be,
subject to third party patent infringement or other intellectual
property-related lawsuits as we face increasing competition and become
increasingly visible. Any adverse determination related to
intellectual property claims or litigation could adversely affect our
business, financial condition and operating results.

• The risk of a data security breach or service disruption caused by
computer hackers and cyber criminals has increased as the frequency,
intensity and sophistication of attempted attacks and intrusions from
around the world have increased. Our services and systems have been,
and may in the future be, the target of various forms of
cyber-attacks. While we make significant efforts to maintain the
security and integrity of our services and computer systems, our
cybersecurity measures and the cybersecurity measures taken by our
third-party data center facilities may be unable to anticipate, detect
or prevent all attempts to compromise our systems. Any security
breach, whether successful or not, could harm our reputation, subject
us to lawsuits and other potential liabilities and ultimately could
result in the loss of customers.

• We continue to closely monitor current adverse economic conditions,
particularly as they impact SMBs, IT service providers and consumers.
We are unable to predict the likely duration and severity of the
current adverse economic conditions in the United States and other
countries, but the longer the duration the greater risks we face in
operating our business.

• We believe that competition will continue to increase. Increased
competition could result from existing competitors or new competitors
that enter the market because of the potential opportunity. We will
continue to closely monitor competitive activity and respond
accordingly. Increased competition could have an adverse effect on our
financial condition and results of operations.

• We believe that as we continue to grow revenue at expected rates, our
cost of revenue and operating expenses, including sales and marketing,
research and development and general and administrative expenses will
increase in absolute dollar amounts. For a description of the general
trends we anticipate in various expense categories, see "Cost of
Revenue and Operating Expenses" below.

Sources of Revenue

We derive our revenue primarily from subscription fees for our premium services
from SMBs, IT service providers, mobile carriers, customer service centers,
original equipment manufacturers, or OEMs, and consumers and to a lesser extent,
from the delivery of professional services primarily related to our Xively
business. The majority of our customers subscribe to our services on an annual
basis and pay in advance, typically with a credit card, for their subscription.
A smaller percentage of our customers subscribe to our services on a monthly
basis through either month-to-month commitments or annual commitments that are
then paid monthly with a credit card. We initially record a subscription fee as
deferred revenue and then recognize it ratably, on a daily basis, over the life
of the subscription period. Typically, a subscription automatically renews at
the end of a subscription period unless the customer specifically terminates it
prior to the end of the period.

Employees

We have increased our number of full-time employees to 748 at June 30, 2014 as
compared to 613 at December 31, 2013 and 589 at June 30, 2013.

Cost of Revenue and Operating Expenses

We allocate certain overhead expenses, such as rent and utilities, to expense
categories based on the headcount in or office space occupied by personnel in
that expense category as a percentage of our total headcount or office space. As
a result, an overhead allocation associated with these costs is reflected in the
cost of revenue and each operating expense category.

Cost of Revenue. Cost of revenue consists primarily of costs associated with our
data center operations, customer support centers and our Xively professional
services team. Included in these costs are: wages and benefits for personnel,
telecommunication and hosting fees associated with managing our data centers and
the hosting of our services, contingent bonus expense related to the Ionia
acquisition (see Note 4 to the Condensed Consolidated Financial Statements),
hardware and software maintenance costs and depreciation. Additionally,
amortization expense associated with the acquired software, technology and
documented

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know-how, as well as internally developed software is included in cost of
revenue. The expenses related to hosting our services and supporting our free
and premium customers are related to the number of customers who subscribe to
our services and the complexity and redundancy of our services and hosting
infrastructure. The expenses related to our professional services team are
driven by our investment and efforts to support the growth of our Xively
business. We expect cost of revenue expenses to increase in absolute dollars but
remain relatively constant as a percentage of revenue as we continue to invest
in and expand our professional services team to support the growth of our Xively
business and we continue to increase our number of customers over time.

Research and Development. Research and development expenses consist primarily of
wages and benefits for development personnel, professional fees associated with
outsourced development projects and depreciation associated with assets used in
development. We have focused our research and development efforts on both
improving ease of use and functionality of our existing services, as well as
developing new offerings. The majority of our research and development employees
are located in our development centers in Europe. Therefore, a majority of
research and development expense is subject to fluctuations in foreign exchange
rates. We capitalized approximately $0.6 million and $0.9 million for the six
months ended June 30, 2013 and 2014, respectively, of costs related to
internally developed computer software to be sold as a service, which was
incurred during the application development stage. The majority of research and
development costs have been expensed as incurred. We expect that research and
development expenses will increase in absolute dollars as we continue to enhance
and expand our services but will remain relatively constant as a percentage of
revenue.

Sales and Marketing. Sales and marketing expenses consist primarily of online
search and advertising costs, wages, commissions and benefits for sales and
marketing personnel, offline marketing costs such as media advertising and trade
shows, professional fees and credit card processing fees. Online search and
advertising costs consist primarily of pay-per-click payments to search engines
and other online advertising media such as banner ads. Offline marketing costs
include radio and print advertisements as well as the costs to create and
produce these advertisements, and tradeshows, including the costs of space at
tradeshows and costs to design and construct tradeshow booths. Advertising costs
are expensed as incurred. In order to continue to grow our business and
awareness of our services, we expect that we will continue to commit resources
to our sales and marketing efforts. We expect that sales and marketing expenses
will increase in absolute dollars but remain relatively constant as a percentage
of revenue.

General and Administrative. General and administrative expenses consist
primarily of wages and benefits for management, human resources, internal IT
support, legal, finance and accounting personnel, professional fees, insurance
and other corporate expenses. We expect general and administrative expenses
related to personnel, recruiting, internal information systems, audit,
accounting and insurance costs will increase in absolute dollars but remain
relatively constant as a percentage of revenue as we continue to support the
growth of our business. Assuming that there are no adverse changes in the status
of the 01 Communique litigation (see Note 10 to the Condensed Consolidated
Financial Statements), we expect associated legal costs, which are included in
general and administrative expenses, to remain relatively constant.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, or GAAP. The preparation of
our financial statements and related disclosures requires us to make estimates,
assumptions and judgments that affect the reported amount of assets,
liabilities, revenue, costs and expenses, and related disclosures. We base our
estimates and assumptions on historical experience and other factors that we
believe to be reasonable under the circumstances. We evaluate our estimates and
assumptions on an ongoing basis. Our actual results may differ from these
estimates under different assumptions and conditions. Our most critical
accounting policies are listed below: